UK economy during 2008 recession Essay Example | Topics and Well Written Essays - 1000 words

UK economy during 2008 recession - Essay Example It is worth mentioning that decline in consumption has direct adverse impacts upon production, which then leads to closure of businesses followed by retrenchment and unemployment. Also, the subprime mortgage property crises in USA triggered closures, mergers and acquisitions of US financial institutions, but it also negatively affected UK investment, commercial banks and financial institutions as they were among the businesses that also made huge investments in US banking and property sectors. Finally, this led to a credit crunch like situation that sabotaged the financial position of UK banks, which were facing liquidity problems and were reluctant in sanctioning loans to borrowers. Finally, the expectations and forecasts that UK economy would contract by more than 2 – 2.5% in 2009 also aggravated the situation and interest rates were reduced to 3% from 4.5% by Federal Bank after instructions of UK government regarding formulation of new monetary policy to reduce business cos ts, to boost investors and consumers’ morale and to trigger greater purchase responses. Recall that economic theory argues that the greater the number of transactions and consumption level, the more employment and jobs opportunities will create due to multiple exchanges of money among people (Hetzel, 2009). As far as the fiscal policy is concerned, it should be pointed out that UK government announced financial bailout packages of ?12bn and ?18bn so that it could pump money in the economy to eradicate liquidity crises and trigger consumer purchase responses. In addition, the government also announced tax cuts (direct and indirect levies) so that businesses could ensure their survival in challenging external business environment. Had the above measures not been taken, the UK cumulative negative GDP growth rate had surpassed 3% due to credit crunch and rising debts (Wren-Lewis, 2010). 2. Explain UK monetary and fiscal policy during the crisis according to IS - LM model. It is w orthwhile to mention the fact that IS – LM model shows the relationship between real interest rate and output level. The IS curve shows the corresponding interest rate that clears the good market. The IS curve slopes downward because the aggregate output increases at low real interest rates and vice versa. Indeed, IS curve is derived from changes in desired investment and desired saving in an economy. The LM curve shows the real interest rate that clears the asset market. For instance, the LM curve is actually derived from changes in real money supply and real money demand. In addition, economic theory talks about Full Employment Line that shows the labour market equilibrium i-e employment and output are at Full employment level. As far as the UK economy is concerned, I would assume that the IS – LM had been in general equilibrium prior to recession i-e the goods, asset and labour market were in equilibrium simultaneously. Real interest IS LM Equilibrium point Output N ow when UK economy entered in recession, the UK government changed the monetary and fiscal policies that would cause shifts in IS and LM curves. For example, the reduction in nominal interest rate on money will reduce money demand, thereby reducing the real interest rate that clears asset market and causing a downward shift in LM curve. Similarly, increasing nominal money supply in market through stimulus package will reduce real interest rat

Business strategy Essay Example | Topics and Well Written Essays - 2750 words - 2

Business strategy - Essay Example Apple Inc., possesses wide base of total assets and this makes them largest technology company across the globe. There is large number of customers who opts for Apple products and this has enhanced brand loyalty. Brand loyalty of the product is due to unusual items manufactured by the company. It is considered to be most admired company in United States. The strategic position of the company is well supported by its understanding about customer’s taste and preferences. iPhone denoted creativity of Apple Inc., in smartphone industry. In this study, strategic analysis would be exhibited on iPhone 6/6+ of Apple. This shall indicate effective utilization of resources and competencies in order to address customer demand and secure high profit margins. The company well segments consumer market so that manufactured product reaches right consumer. High prices of its product line are substituted by innovation and quality which cannot be easily imitated by other players in the market pl ace. The study shall encompass analysis of Apple iPhone 6/6+ in technology industry, along with usage of models to determine its strategic framework. Models such as Porter’s Generic Strategies, Bowman’s Strategy Clock, Pestle analysis, Five Forces Model, Value Chain, Resources and Competencies Audit and Strategic Group Mapping will be included in this research study. There are four kinds of generic strategies such as cost leadership strategy, differentiation strategy, focus cost strategy and focus differentiation strategy. Products launched by Apple Inc., are unique by nature and are targeted towards a particular consumer market segment. Focus differentiation strategy states that narrow market segment are targeted by the company so as to acquire maximum market share. This form of differentiation strategy is adopted by a company when high priced products are being sold in the market place. Apple iPhone 6/6+ are targeted towards high income